For many years, operators of small and medium enterprises (SME) have been performing manual bookkeeping work for transaction records. The books containing the transaction records are then given to the operators' accountants for preparing accounts statements and tax returns.
Recent changes in taxation law, especially the introduction of the Goods and Services Tax (GST) which requires businesses to collect GST in any transaction that attracts this tax and to submit periodic Business Activities Statements (BAS), have made manual bookkeeping tasks extremely complex. Consequently, SME operators, in general, have resorted to use a computerised accounting system to enter transaction records so that the records can be processed for generating reports for their accountants and the tax authority.
To use the computerised accounting system effectively and to produce accounts reports that are acceptable to accountants and the tax authority, the operators not only have to learn basic computer skills, but also accounting terms and procedures employed in their accounting application software and taxation liabilities appropriate for their businesses.
The application software must also be configured to suit accounting practices of individual SME operators. That means the operators must acquire the necessary knowledge in accounting practice and tax law in order to configure the application software to use the accounting procedures and tax liability options that suit their businesses.
The application software is intended for general use and employs common accounting terms for transactions. Consequently, the SME operators can no longer use the transaction item descriptions they have adopted for their manual bookkeeping system. This represents a major disadvantage for most of the SME operators who now must spend time familiarising with new accounting terms that they are unfamiliar of. Transaction entry errors often occurs when using unfamiliar terms to enter transaction records. The errors can be very difficult to trace and correct.
With the introduction of Goods and Services Tax (GST), the computerised accounting system has become more complicated for the SME operators as they must now act as collection agents for the GST. To set up the accounting system for generating BAS, SME operators must configure the application software with appropriate tax liabilities of goods and services that attract GST and other taxes. These requirements place heavy burdens on SME operators. In addition, many of them do not have sufficient knowledge to determine which transaction items attract GST and which do not. They also do not have the necessary knowledge to allocate transactions in order to correctly report the GST, Pay As You Go (PAYG) Withholding and PAYG Installments in the BAS.
Periodically, the entered transaction records need to be reconciled with bank records. The reconciliation process is not generally understood by SME operators, and is time consuming.
The known computerised accounting system is for processing accounts reports only. It would be desirable to use information obtainable from transaction records to perform management related functions.